Here’s what economists don’t understand about race…

We just ape economics taught in the US. But now US seems to be looking at issues which have long troubled India.

I had written about Fed looking to increased diversity in both its employment and policy. But perhaps this is just the tip of iceberg. Large ignorance of racial differences and subsequent inequality is leading to a much wider discussion and need for reservations.

These issues are not new to US but have been ignored by economists for a long time. The 2008 crisis and its eventual fallouts are leading all these buried issues to come back.

Prof William Darity of Duke University speaks about race and how it has been ignored all these years:

An undergraduate at Brown University in the 1970s, William Darity, Jr. expected to learn the reasons behind the inequality he’d seen all around him growing up in the Middle East and North Carolina. He realized pretty quickly that economists were not going to be much help.

Darity, the son of North Carolinians, spent his first eight years in Lebanon and Egypt while his father worked for the World Health Organization, then lived until the age of twelve in Chapel Hill, North Carolina. During the Jim Crow era, he visited his grandmother in a town where a railroad track divided the city into black and white sections, marking two separate economic worlds.

At Brown, Darity was disappointed by how his teachers explained why some people reap the benefits in a society and some don’t. Most taught that some individuals and groups grew more prosperous than others because of differences in education — what economists refer to as “human capital.” Labor economists tended to say that educational differences meant that some people were more productive than others, which explained why some flourished and others languished in the long run. They believed that competitive markets would ensure that everybody ended up earning according to what they produced. Those with higher earnings were able to save more, and so they accumulated more wealth over the course of their lifetime.

Darity wondered, then, why disparities persist, even when markets are competitive. Black Americans, for example, are paid less than their white counterparts at every level of education.Motivated by what he describes as youthful hubris, Darity got a Ph.D. in economics and set out to change the way economists deal with these issues.

This is so so similar to India.

The solutions too. They recommend jobs reservations!

Darity is unimpressed.

“If you buy the black dysfunction story, then the key is for young black men to pull up their pants or the equivalent,” he says. “But that’s a very different policy from saying, well, we should assure all Americans a human right to work. Or even if we don’t talk about an employment guarantee, then at least the basic income guarantee.”

“If we’re concerned about black-white disparities specifically and we want to have a race-specific policy, then I think we have to start talking about a program of reparations [for slavery].” (Darity and his wife, Kirsten Mullen, are currently completing a book that details how a reparations program might be executed, due to hit the shelves by mid-2017).

“If we are not willing to pursue race-specific policies,” Darity argues, “then we need universal programs that are race-conscious in the sense that they will disproportionately benefit the most disadvantaged groups even though they are programs that everyone is eligible for.” One such program would be a Federal job guarantee.

INET is even holding a conference looking at reasons for decline of Detroit which is linked to all these differences:

The racism of the prevailing political order was baked into the economics profession from its inception. Race is a social construct rather than a scientific concept. But that construct expresses a power relationship with profound consequences for the lives of millions of Americans, black, brown and white.

Detroit was the first major American city to fall victim to badly-managed globalization, but it won’t be the last. Race, particularly focused on the failings of African-American administration in the City of Detroit, was used as a mask to avoid the real failures of the American economy and governance. The violence and velocity of Detroit’s decline frightens everyone who holds a belief in the American Dream. Attempts to blame racial tension for the problems of Detroit is a mask and an anesthetic. The nation’s failure to manage the city’s de-industrialization left tens of thousands of working-class Americans to fend for themselves on an increasingly bleak economic landscape, deepening political polarization. Racial animosity did not cause these problems, but it was certainly inflamed by them.

Understanding the causes of Detroit’s decline — and potential pathways to renewal — is a critical challenge facing policy makers, and the economists who advise them.

Our conference on “Detroit’s Tomorrows and Tomorrow’s Detroits”, will investigate how a clear-eyed perspective on new methods of healing of racial polarization can contribute to the revitalization of this great city, and also lend insight to the challenges facing myriad other multi-ethnic cities in America and around the world facing the stress of economic adjustment in the era of globalization.

Hmmm..

All such solutions for India have obviously invited mock from media and experts. We have long been sold on the idea of meritocracy as “it happens in US”. Now with US talking about all these matters as well, what will we say?